Chinese Farm Reform: Something Revolutionary This Way Comes?
Jan 06, 2004
stratfor.biz
Summary
Beijing has announced a new round of measures to help alleviate Chinese farmers' economic burdens. Although reforms have been implemented piecemeal over the past several years with marginal success, events in 2003 in China -- including the Hu government's slap-on-the-wrist punishment of entrepreneur Sun Dawu -- suggest that more radical steps could be in the offing.
Analysis
Officials with the Chinese Ministry of Finance and the State Development and Reform Commission said Jan. 5 that they have abolished, exempted or lowered 15 types of financial charges in order to reduce the financial burden on the country's approximately 800 million farmers. The government reportedly will not approve any new fees on farmers before the end of 2005 and urged regional and local authorities to lower their fees as well.
The move is Beijing's latest bid to improve the Chinese peasantry's lot in life. Rural incomes remain flat, and farmers face stagnant prices, competition from agricultural imports and the caprices of corrupt local leaders. New President Hu Jintao's administration has been responsive in meeting some of the needs of China's rural residents in recent months, including considering some radical changes and consenting to direct political challenge.
Chinese farmers, by far the largest single group in the nation, have had much to complain about since the mid-1990s, when Deng Xiaoping's reforms began to fundamentally change the nation's economic and political structures. For nearly a decade, many agricultural prices -- particularly grain -- have remained low because of government fiat and relative abundance. Beijing's policies have permitted China to feed itself with inexpensive food, allowing rapid growth in other sectors geared more toward hard currency-earning exports. But nearly half the country is living hand-to-mouth while urban centers chug along at impressive growth rates. The semi-official ratio between urban and rural earnings stands at approximately 3:1.
The plight of the rural proletariat has been at the center of many Communist Party directives over the past several years. The Third Plenary Session of the Chinese Communist Party's Central Committee in 1998 emphasized reform in the countryside to facilitate equitable growth between China's rural and urban areas. Nearly six years later, the party still is struggling to accomplish the monumental task -- and farmers do not seem to be faring any better.
Staying on the land while other family members moved east to help build and work in the new global manufacturing center on China's eastern seaboard, farmers have fallen prey to corrupt local officials largely out of sight and beyond the grasp of Beijing. China's rural citizens are at the mercy of local officials who frequently run the towns and villages as their own private fiefdoms. The practice of levying illegal taxes, fees and licenses to line local cadres' pockets is widespread. In addition, local officials have been known to receive kickbacks for illegally confiscating land from farmers and redistributing it for industrial and real estate development.
After tinkering with rural tax reform for a few years in a handful of select areas, the central government announced in April 2003 it would apply the program throughout the country. The reforms are supposed to reduce the rural-urban income gap, maintain social stability amid economic changes following Beijing's entry into the World Trade Organization and tighten central control over regional and local governments. A major part of the reforms is the reduction of local taxes and fees and, now, the latest reduction of 15 charges to farmers -- including quarantine certificates, licensing fees for water and land-rights use, education, and fishing boat inspections -- is part of the wider reform program.
In addition to the tax reforms, the party has tried to instill new discipline on its rural front line by launching numerous inspection tours using local elections to help alleviate the problems, but corruption is so pervasive among the lowest level of the Chinese government that Beijing appears incapable of solving the problem.
Still, it is striking how similar the 1998 rural reform goals are to the ones still being slowly implemented in 2004.
Party leaders are well aware of the dangers of disgruntled rural masses rising up in revolution -- some of them wrote the book on it -- and in order to rectify the "contradictions" in the countryside (to borrow a term from Mao Zedong), Beijing has to create structural change and do it far more quickly than it has over the past decade.
A few surprising events in 2003 lead Stratfor to believe that radical changes could be coming to China's rural areas. It seems Beijing might allow its peasants to mortgage their land rights to help bring more capital to the country's rural areas. The new policy, which has been experimented with in a few provinces, would allow some farmers to amass large landholdings and recreate what would have been anathema to Chairman Mao: a landlord class in rural China.
The second, and even more surprising, event is the rehabilitation of Chinese tycoon and self-appointed champion of the peasant, Sun Dawu. Sun was arrested after publishing essays critical of government policies and state-controlled banks and for establishing an unauthorized independent credit cooperative for farmers. The outspoken businessman committed two venal sins in China: First, he openly criticized the government, and by extension the Party; and, second, he encouraged Chinese farmers to withdraw their money from state-controlled banks if they did not like the way the government loaned money -- an idea that strikes a chord with the farmers who seethe at the thought that the vast majority of the loans from China's Big Four commercial banks go to unproductive state-owned enterprises, while they find it difficult borrow anything.
Not long ago, Sun would have received a one-way ticket to a re-education camp in a barren part of China, but he got off with little more than a sharp slap on the wrist, heavy fines and a three-year suspended sentence for "causing disorder in the local financial sector." Sun's favorable treatment indicates a couple of things: First, he is well-connected, and that is what likely saved his skin. But more importantly, his commuted sentence reveals that -- in the eyes of Beijing -- the entrepreneur's charges against the state were correct.
This is a milestone in modern Chinese history. Beijing reflexively counters any challenges to its authority with swift and crushing force; witness the student demonstrations in 1989 and the campaign against the Falun Gong. Not only did the Party accept criticism in Sun's case -- although it did so with little grace -- it accepted it from a capitalist to boot. This probably is an indication of just how far the situation in the countryside has deteriorated.
Sun's rehabilitation by the Party could set a fatal precedent. There are many entrepreneurs, workers, farmers, religious adherents and intellectuals across China who have ideas on how Beijing could better run the country, and their activism is almost always rewarded with censure. But now, other well-placed individuals with convictions could become emboldened. Since it invites more dissent, allowing a small amount of plurality in an authoritarian regime can be a slippery slope.
Although the unexpected behavior from Beijing regarding mortgaging land rights and Sun's light punishment suggest the situation possibly has become desperate enough that the government is being forced to go to extraordinary lengths to tackle the problems, it also demonstrates the Hu administration's ability to react more quickly and decisively than that of his predecessor, Jiang Zemin. The first year of the new president's administration has been marked by a number of popular policy decisions, including his agile handling of the SARS crisis early in the year, repealing outdated vagrancy laws and canceling the leadership's annual retreat to a seashore resort in Beidaihe. Judging by Hu's track record in 2003, the upcoming year could see sweeping changes in China's countryside which will begin to address adequately the complaints of the majority of the country's population. |
